The Dow will plunge 4,000 points if Joe Biden shuts down the US economy with six-week lockdown, strategist predicts

The Dow will plunge 4,000 points if President-elect Joe Biden shuts down the US economy to cope with rising coronavirus cases, a strategist has predicted.

David Nelson, a strategist at Belpointe Asset Management, made the harrowing forecast on Thursday after a member of Biden's coronavirus advisory board, Dr Michael Osterholm, suggested a six-week lockdown. 

When asked by Yahoo Finance Live how the markets would react to such a lockdown, Nelson said: '3,000 or 4,000 points lower at least.'

'The markets wouldn't like that. I don't think the markets are pricing that in at all.'

He noted that when there was talk of a second lockdown a few months ago during the summer surge, it 'caused a ripple in the markets'.

'I'm hoping that doesn't happen. It looks like America is starting to get the message that practicing very safe guidelines laid out by CDC go a long way. 

David Nelson, a strategist at Belpointe Asset Management, made the harrowing forecast on Thursday after a member of Biden's coronavirus advisory board, Dr Michael Osterholm, suggested a six-week lockdown

'A complete shut down of the economy, I think that's a huge mistake.' 

Asked where investors will hide if markets do drop off the back of a lockdown, Nelson said: 'A lot of money will go to cash. 

'They will continue to hide out in the stay and home trade but that can only take you so far. Then the question is: What happens when you reopen again?'

His comments came after Osterholm suggested the US should go into a total national lockdown for six weeks to avoid 'virus hell' and suggested that the federal government pay workers while country is shutdown. 

Osterholm said the country could cover individual companies' and local governments' losses in order to drive COVID-19 infection rates down. 

He later clarified in an interview with ABC on Thursday that he did not discuss a lockdown with anyone on the advisory board and he did not think there was a national consensus for it. 

'Nobody's going to support it,' he said. 

Dr Vivek Murthy, a former US surgeon general tapped to lead Biden's COVID-19 board, said on Friday there was no plan to shut the country down and that the new administration's approach will be targeted at specific areas.

He said doctors have learned a lot about how the virus spreads and what steps to reduce risk are effective.    

The Dow plunged early on in the pandemic amid lockdowns across the country. Nelson predicts it could plunge again if a national lockdown is put in place

'We're not in a place where we're saying shut the whole country down. We got to be more targeted,' Murthy told ABC's GMA. 

'Right now the way we should be thinking about this is more like a series of restrictions that we dial up or down depending on how bad spread is taking place in a specific region.'

Murthy cited New York City as an example where health officials are targeting COVID interventions 'down to the ZIP code.'

Wall Street advanced and the US Treasury yield curve steepened on Friday as upbeat earnings and the assurances from Biden's COVID advisory team helped investors look past the threat of a new lockdown. 

The Dow Jones Industrial Average rose 234.07 points, or 0.8%, to 29,314.24, the S&P 500 gained 25.88 points, or 0.73%, to 3,562.89 and the Nasdaq Composite added 55.43 points, or 0.47%, to 11,765.02. 

Encouraging results from Cisco Systems Inc and Walt Disney Co helped send Wall Street's three major stock indexes higher.

Economically sensitive cyclicals and small caps, stocks that were the stars of the rally at the beginning of the week, once again led the charge. 

On Monday, investor risk appetite was boosted by Pfizer Inc's announcement that the COVID-19 vaccine being developed with German partner BioNTech SE appeared to be 90 percent effective. 

Dr. Michael Osterholm , who was appointed to Joe Biden's COVID-19 task force Monday, has suggested the US should go into a national four to six week lockdown as it awaits a vaccine. Dr Anthony Fauci , however, has insisted a lockdown doesn't need to happen